Which of the following statements is true?
A)Under the BIS scenario analysis, an FI needs to assess its liquidity position in comparison to other FIs in the market based on different scenarios.
B)Under the BIS scenario analysis, an FI needs to estimate the size of cash flows for each type of asset and liability based on past experience.
C)Under the BIS scenario analysis, an FI needs to assign a timing of cash flows for each type of asset and liability by assessing the probability of behaviour of those cash flows under the scenario being examined.
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

The statement that is true under the BIS scenario analysis is that an FI needs to assign a timing of cash flows for each type of asset and liability by assessing the probability of behavior of those cash flows under the scenario being examined. This is because scenario analysis involves estimating the impact of adverse scenarios on an FI's liquidity position by estimating the size and timing of cash flows for different types of assets and liabilities. The FI needs to assess the probability of behavior of the cash flows under each scenario to determine the timing of the cash flows. Option A is incorrect because the comparison of liquidity position is not necessarily based on other FIs in the market. Option B is incorrect because past experience only provides a reference point and does not necessarily reflect future behavior. Option D is incorrect because there is a true statement among the options.

Which of the Following Statements Is True